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Milk

General Market Situation 2010

During 2010 international dairy markets recovered from the 2009 slump.  EU dairy commodity prices increased steadily during the first half of the year before levelling off in the second half.  The market measures that helped to stabilise the situation in 2009 were not required in 2010, as exports increased without refunds and intervention buy-in was not triggered.  EU milk production increased from April onwards and ended the year approximately 1%  up on 2009.  Milk prices increased across the EU reflecting the market upturn.

World milk production is estimated to have increased by 1.7% in 2010, with the EU accounting for around 19% of the total.

Output in Ireland

In 2010 there was a very significant increase (circa 40%) in the value of the milk sector to €1,536 million. This followed a decrease of about 32.5% in 2009.

Table3.4 

Prices

The average milk price paid to producers in 2010 was 30 cent/litre, a 25.5% improvement on the 2009 price of 24 cent. On top of that, dairy farmers continued to receive the dairy premium of 3.6 cent/litre. In the EU the average milk price was also around 30 cent/litre, up from just over 26 cent in 2009.

Figure3.2 

Figure3.3 

Production of Dairy Products

The Irish Dairy Bord estimate that Irish butter, cheese and WMP production increased by 12.5%, 4.5% and 36% respectively in 2010. SMP production decreased by 12.9%.

 

Exports

Exports of Irish dairy products and ingredients were valued at some €2.29 billion in 2010.  This represented an increase of 17% from 2009 as international dairy markets saw strong improvement.  Dairy exports were helped by improved global demand, stronger prices and higher production in Ireland.

Intervention/Market Management

Due to the improved market situation in 2010 there was no buying in of Intervention butter or SMP, and the Commission sold 23,696 tonnes of butter (13,922t Irish) and 12,560t of SMP onto the market.  Under the 2010 most deprived persons scheme, a total of 50,000t of butter and 65,000t of SMP was released to charities.  By year end Intervention stocks in the EU were 190,000t of SMP and zero butter.  Under the 2011 most deprived persons scheme, 93,000t of SMP will be released to charities between June and September.  There remains some 80,000t of SMP (8,663 Irish) for sale under the market tender procedure.  

The 2010 Private Storage Aid scheme for butter reverted to the usual period of operation from March to August, and 83,000t of EU butter was stored under the scheme (18,800t in Ireland).  Export refunds for dairy products remained at zero throughout the year.

Outlook 2011

EU and world dairy markets are positive at present as market forecasts predict global demand exceeding supply in 2011, and the short term prospects are good.  In the medium term most analysts forecast strong demand and higher prices for dairy products, with increased demand fuelled by population growth and growing prosperity in developing countries.

Quota Management

There were an estimated 18,294 active milk producers in 2010, a reduction of approximately 3.4% on 2009. (See Statistical Annex Table 12.6).

The Milk Quota Trading Scheme remains the main means by which milk quota is acquired by producers. The Trading Scheme is comprised of two elements, namely, a Priority Pool and a Market Exchange. The Priority Pool distributes quota to priority categories such as young farmers and small-scale producers at a maximum price, which in 2010 was reduced by the Minister from 6 to 5 cent per litre. The Market Exchange is responsible for the remainder - typically about 70 per cent - of the quota trade. Buyers and sellers determine the price on the exchange, and the exchange takes place typically on a Co-op area level.

In 2010 the Trading Scheme was responsible for the transfer of about 28 million litres of quota in respect of the 2010/2011 milk quota year, and a further 46 million litres was traded in the December 2010 exchange, which was the first of two exchanges allocating quota in respect of the 2011/2012 milk quota year.

In the milk quota year 2009/2010 Ireland’s deliveries of milk did not exceed the national quota and no super levy was paid to the EU Commission.

New Areas of Interest

New Entrants to Dairying

The second of five annual increases of 1% in national milk quota agreed under the Health Check became available on 1 April 2010. Three quarters of this increase was allocated as a top-up to the quotas of all active producers. The remaining 0.25% was set aside for allocation to new entrants to dairying. The New Entrants Scheme subsequently identified 73 successful applicants who will be allocated quotas of between 180,000 and 200,000 litres each in the period up to 1 April 2012 to allow them to commence dairy farming on a scale that is immediately viable. The Scheme will be repeated in 2011, and in addition to attracting ‘brand new’ entrants to dairying, provision will be made for producers who purchased quota either as new entrants or successors through the Milk Quota Trading Scheme since its inception in 2007.

Dairy Efficiency Programme

A new three-year Dairy Efficiency Programme commenced in 2010. Under the Programme €18 million of unspent Single Payment Scheme funds is being spent in encouraging significant efficiency gains on Irish dairy farms. The funding supports the transfer to milk producers, through participation in discussion groups, of technology and knowledge that will help them to adopt best practice in the running of their enterprises. These groups, which are formed and assisted by facilitators who have been trained by Teagasc to a FETAC-accredited standard, place particular emphasis on the adoption of best practice in relation to grassland management, breeding and financial management. Participants have their progress monitored by their facilitator, and are required to meet certain standards in relation to attendance and project completion. In return they receive a payment at the end of each year, with the level of payment determined by the participation rate in the Programme.

Support for Dairy Research

Starting in 2010, significant amounts of milk quota are being made available to a major research project aimed at assisting the development of profitable, expanding dairy farms as the sector moves towards quota abolition in 2015. The project is a collaboration between Teagasc Moorepark, the Agricultural Trust, AIB Bank and Glanbia. It consists of three dairy farms, one of which is a large farm developed on a greenfield site, and the other two family farms of different sizes with potential to expand. The information and management data generated is being made available to all Irish dairy farmers through Teagasc’s advisory network and the BETTER farm programme. The quota requirements run from just over 125,000 litres in the 2009/2010 milk quota year to just under 3 million litres in 2014/2015.